Home » Border Wars » Advancement of Legal Expenses to Corporate Executives Under Missouri and Other Jurisdictions’ Law by Andrew Duncan

Advancement of Legal Expenses to Corporate Executives Under Missouri and Other Jurisdictions’ Law by Andrew Duncan

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In this comment, I intend to explore the concept of advancement, which is a contractual provision granting the right to advancement of legal fees and expenses by a corporation to a named party, usually an executive or high-level employee, with the employer footing the bill. This type of contractual agreement is explicitly authorized in Missouri by statute; however, Missouri courts have had precious few occasions to examine and construe the advancement law. In the few Missouri cases which have dealt with the issue, the courts have brought in decisions and reasoning from courts sitting in other jurisdictions, with particular emphasis on Delaware—the “capital” of corporate law in the United States. An exploration of Delaware and other foreign jurisdictions is necessary to supplement Missouri courts’ construction of both the advancement statute and contracts providing for advancement. Disputes over advancement often arise during shareholder derivative suits against corporate officers, as well as when the corporate employer sues a current or former corporate officer, thus raising the possibility of a corporation paying the legal expenses for its litigation opponent; these situations will be explored in this comment. Of particular interest is the question of whether a board of directors must first vote to approve the disbursement of advancement funds to an executive with whom the corporation is locked in legal battle, or whether an advancement guarantee to an employee (whether contained within an employment contract or a company’s bylaws) can override the express will of a board to deny advancement of such funds to its erstwhile employee. A further topic of discussion is whether a corporation’s claim of a violation by the former employee of his or her fiduciary duties by means of self-dealing can entitle a board to deny an advancement it otherwise would be contractually required to disburse to said employee. The distinction between advancement and indemnification will also be examined throughout this comment. … Read the full text …


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